As any small business owner knows, dealing with people is a crucial element of your business’s success. This applies not only to customers or business partners, but to your employees as well. Creating a productive and well-functioning workforce should be a top priority for every small business. Unfortunately, the more employees you hire, the more complicated things get. Even for very small companies, managing personnel can be a very demanding task.
The simple act of hiring an employee puts your business under all sorts of legal scrutiny. Your business, no matter how small, must contend with a thicket of federal rules governing how you decide between candidates. These include the National Labor Relations Act, the Age Discrimination Act, the Equal Pay Act, the Civil Rights Act of 1964, the Equal Employment Opportunity Act, and the Americans with Disabilities Act. Different states also have their own hiring regulations, making it imperative that you contact your state’s department of labor to make sure your are in compliance. Similar regulations can apply when terminating employees as well. While very small businesses tend to be exempted from many of these regulations, some apply to businesses of all sizes. Keeping track of the myriad intricacies of employment laws as they apply in your area is a headache that most small business owners would prefer to avoid.
Beyond legal issues, the larger your workforce grows, the more complicated it becomes to manage the day-to-day intricacies of salaries, benefits, vacation time, and interpersonal issues, all of which must be juggled in any office. “It’s particularly complicated for small business owners,” says Anna Swigart, president of Small Business Recruiting Solutions, “because they need to keep their attention focused on the ‘big picture’ decisions that chart the company’s course, and it can be hard to do that when you have to spend hours and hours a week filling out benefit forms or dealing with employee conflicts in the office.” And these distractions begin to pile up as the workforce grows. “When you have two or three employees working for you, it’s manageable, but when you have, say, ten or more, the paperwork can be overwhelming.”
Hiring a human resources manager
If you find yourself too distracted by employee issues to adequately concentrate on important strategic decisions, it’s time to consider getting help. Instead of trying to do it all yourself, hire a professional to handle all the paperwork, compliance issues, and personnel management issues that are taking up too much of your valuable time.
“Small business owners generally don’t like to give up control over any area of their business,” says Swigart. “And that means many wait to hire someone to handle human resource issues until the burden has become too great.” But cost is also a factor, she admits. Although just the paperwork alone generated by 20 employees often justifies hiring a human resources manager, many companies don’t bring one in until the number of employees reaches about 50, since skilled human resources managers usually command anywhere from $45,000 to $70,000 a year in salary. (For more details on HR manager salary payscales based on location and industry, click here.)
Outsourcing HR functions
Depending on the size of your company, outsourcing HR functions might be more cost effective. Some HR functions, like payroll or 401(k) management, can be outsourced piecemeal to a variety of firms. Third-party payroll firms typically handle all aspects of your company’s payroll system, including checks, direct deposit, record-keeping, and tax statements, for fees ranging from $50 and up, per pay period.
On the other hand, if you want to clear all HR functions off your desk, and are comfortable with another company handling all of your business’s HR functions, then a Professional Employer Organization (PEO) may be the best option for your business. Using a PEO is, in essence, a means of outsourcing your entire workforce. The PEO becomes the employer of record—your business then leases the employees back from the PEO. The benefit of using a PEO is that all HR functions—payroll, hiring, disciplinary actions, regulatory paperwork, benefits, and employee relations—are done by the PEO. “HR outsourcing enables [a small business] to attract and retain quality employees by providing access to a comprehensive employee benefits package, retirement services plan, and training and development programs, having a positive impact on the corporate culture” says A. Steve Arizpe, Executive Vice President, Client Services and Chief Operating Officer at Administaff, one of the leading PEOs.
Expect to pay anywhere from $80 to $175 for each employee per month, depending on the PEO. There are a number of nationwide PEOs, including Administaff, ADP TotalSource and TriNet Group, as well as a variety of Internet-based PEO search firms like StaffMarket.com to help satisfy comprehensive as well as piecemeal HR needs. You should choose a PEO based on its expertise in serving businesses operating within your industry, the flexibility of its contracts, its length of time in business and experience working with small businesses, and the range of services it offers. “It is wise to check references, inquire about the range of services and accompanying fees, and confirm that the company is a member of NAPEO,” adds Arizpe. “And the most distinguished PEOs are accredited by the Employer Services Assurance Corporation.”
To learn more about how PEOs function, try the NAPEO’s “What is a PEO?” webpage.
To search the ESA database to find an accredited PEO near your small business, click here.